The question of how the epidermal appendages form during development and which pathways regulate the differentiation of the stratified epidermis has been central to epithelial biology. Transcription is one of the most important regulatory mechanisms controlling the stepwise program of epidermal differentiation. Our research efforts have focused in characterizing the regulation and function of Dlx3 homeobox transcription factor, a member of the murine Dlx family, with essential roles in epidermal, osteogenic and placental development. Dlx homeodomain proteins are a family of transcription factors that play crucial roles in developmental processes and differentiation of individual tissues. The Dlx3 gene is broadly expressed in the branchial arches and embryonic ectoderm, as well as in the tooth, hair follicle and interfollicular epidermis. To elucidate the functional role of the Dlx3 homeodomain protein during early development and during epidermal differentiation, we are currently in the process of determining the target genes and the Dlx3 interacting factors necessary to exert the transcription regulatory function. For the comprehensive analysis of Dlx3 gene expression throughout development, we generated a knock-in mouse carrying the reporter gene beta-galactosidase (LacZ) under the control of the endogenous Dlx3 promoter. Whole-mount or local X-gal staining shows the temporal and spatial expression of the Dlx3 gene in various tissues and organs including hair, teeth and bone. Targeted deletion of Dlx3 results in embryonic developmental arrest around day 9.5-10, associated with a gross failure of the placenta to undergo proper morphogenesis. It was not possible to assess the effects of Dlx3 loss of function on epidermal differentiation, since embryonic death occurs significantly earlier than the onset of epidermal stratification (E15.5). Recent work also showed that Dlx3 induction coincides with the onset of commitment to osteogenic lineage, as reflected by the induction of bone-related differentiation genes. Although Dlx3 had been implicated in skeletal development in the human autosomal dominant Tricho-Dento-Osseous syndrome, where the mutation is associated with defects in craniofacial and endochondral bone, a direct role for Dlx3 in bone formation had not been identified. In a collaborative effort with Dr. Lian's laboratory, a regulatory role for Dlx3 in bone-specific transcriptional control during osteoblast development was demonstrated. During embryonic development and organ formation, a series of signals between epithelial cells and underlying mesenchymal cells, leads to the formation of a variety of appendages/organs. Anomalies in epithelial/mesenchymal-derived organs are characteristics of a group of about 150 human heritable pathological disorders defined as ectodermal dysplasias. DLX3 is among the few genes for which mutations have been directly linked with ectodermal dysplasias. The importance of Dlx3 in the patterning and development of ectodermal structures derived from epithelial-mesenchymal interactions during embryogenesis (i.e. tooth, hair) is corroborated by the effects of DLX3 mutations in patients with the autosomal dominant Tricho-Dento-Osseous syndrome. Recent research on the mechanistic role of Dlx3 in epidermal development and appendage formation has led to the important finding that Dlx3 is a direct target of the p63. This work presents the crucial finding that besides autosomal mutations in either DLX3 or P63 genes being associated with human ectodermal dysplasias, misregulation of DLX3 function is directly involved in the pathogenesis of ectodermal human syndromes associated to p63 molecular lesions. Furthermore, we have recently demonstrated that Dlx3 induces phosphorylation-dependent p63 degradation, involving the activation of Raf1 kinase by Dlx3.DLX3(TDO) mutant protein is unable to promote &#916;Np63&#945;protein degradation and impairs the expression of cell cycle regulatory proteins and skin differentiation markers. However, we found that in cell expressing equal amounts of mutant and wild type DLX3, &#916;Np63&#945;protein level is efficiently regulated implying that genetic heterozygosity at the DLX3 locus protects TDO patients from developing severe p63-associated skin defects. Furthermore, utilizing mouse models, we have determined that the selective ablation of Dlx3 in the epidermis results in complete alopecia owing to failure of the hair shaft and inner root sheath to form, which is caused by the abnormal differentiation of the cortex. Significantly, we elucidated the regulatory cascade that positions Dlx3 downstream of Wnt signaling and as an upstream regulator of other transcription factors that regulate hair follicle differentiation, such as Hoxc13 and Gata3. Colocalization of phospho-Smad1/5/8 and Dlx3 is consistent with a regulatory role for BMP signaling to Dlx3 during hair morphogenesis. Importantly, mutant catagen hair follicles undergo delayed regression and display persistent proliferation, and ablation of Dlx3 expression in the telogen bulge stem cells is associated with a loss of BMP signaling, precluding re-initiation of the hair follicle growth cycle. Taken together with hair follicle abnormalities in humans with Tricho-Dento-Osseous (TDO) syndrome, our results establish that Dlx3 is essential for hair morphogenesis, differentiation and cycling programs. In order to investigate the functional alterations caused by the mutated DLX3TDO isoform ex vivo, we used tetracycline-inducible osteoblastic and keratinocyte cell lines and calvarial derived osteoblasts in which the expression of DLX3WT and/or DLX3TDO could be regulated and monitored. Our results show that the transcriptional activity of DLX3WT is significantly reduced in the presence of the mutated isoform, indicating that DLX3TDO has a dominant negative effect on DLX3WT transcriptional activity.